China’s Auto Industry in 2050

China has about 170 carmakers today, most of which produce fewer than 10,000 vehicles a year. That is unsustainable. Here's my prediction of what the Chinese auto industry might look like in 2050.

China has about 170 carmakers today, most of which produce fewer than 10,000 vehicles a year (based on IHS Automotive 2014 data). That is unsustainable.

The market looks pretty much like American motor manufacturing in the early 1900s, so one could expect mass consolidation and a focus on manufacturing efficiency, right? Maybe not.

Here is my prediction of what the Chinese auto industry might look like in 2050:

By 2050 China has long passed the 100 million vehicle sales milestone -- that party was in 2044. Eighty percent of those cars are electric, and all of them are largely self-driving.

Of the top 10 global car brands by sales volume, four are Chinese (Beijing Auto and VW are fighting it out year-after-year for the top spot), and China sells 20 percent of the cars it produces as exports, dominating the emerging auto markets of Indonesia, Vietnam, and the Middle East.

China is viewed as a technology innovator and gauge of future vehicle trends. The US has a single auto manufacturer, France has sold half its auto industry to China, and a premium-brand German automaker is under Chinese ownership.

So how exactly do we make that leap?

Three factors play into the transition of influence: the breakup of OEM joint ventures, consumer behavior, and technology investment.

Dismantling the successful joint-venture enterprises is a tough one. These cooperations between European or American carmakers and local Chinese car companies make big profits and are thus protected and favored by the local government.

However, Beijing sees them as counter-innovative and views the local car brands in turn becoming inefficient and non-competitive. The technology-sharing dynamic that was the spirit of the original agreements has not materialized, and the joint ventures are a short-term cash cow but a long-term strategic liability.

By forcing the local automakers to develop new brands to directly compete with their JV partners, we will start to see the breakup of the joint ventures from around 2020, and the emergence of three soon-to-be-global players: Geely, BYD, and Great Wall. But unlike US motor manufacturing history, consolidation is not the major factor in play here.

Secondly, consumer behavior is driving Chinese carmakers to differentiate at an accelerated rate in order to grab domestic market share.

This means that they are being forced to look beyond imitation and embrace innovation. The average car buyer in China is more than 20 years younger than the American equivalent, which means connected car technology, safety, on-board entertainment, and cool gadgets are increasingly expected rather than desired. Remote-start via cellphone, remote self-park, and wearable technology that controls vehicle function and also monitors driver biometrics are under development at all major Chinese carmakers.

While this is not necessarily leading tech in itself, if you look back a few years and plot innovation progress on a chart it would look exponential. So extrapolate this theoretical model to 2050 and compare it to the rest of the world.

The third element is investment choices.

China is making a few big technology bets, preferring to skip altogether the "catchup" on gasoline technology and diving straight into new energy vehicles.

The fast growing auto market opportunity, plus pressures to reduce emissions, and the economics of oil imports are driving this strategy. Government research money is pouring into carmakers, Tier 1 auto suppliers, and universities, all which are encouraged to collaborate among themselves and globally.

Visit any Chinese university that has a large automotive engineering department, and you will see it littered with a range of international test cars that have wires and batteries hanging out of them, running numerous research projects in conjunction with global carmakers. Add to this the likelihood that China will be among the first to invest in a nationwide network of charging stations, by necessity and through economic strategic intent, and all the elements that could lead to global leadership in new energy vehicles are appearing on the horizon.

Is this vision of the future going to be absolutely correct? No, certainly there are too many variables to precisely forecast how the global auto market will evolve. The only conclusion that can be drawn with any certainty is that this will probably all happen before 2050 -- way before.

— Andrew Macleod is global product development and marketing manager at Freescale Semiconductor.

Some of these predictions sound about right to me, specifically the ones about consolidation of auto companies globally, and the increased connectivity. Consolidation of brands happens for several reasons, one of which is that globalization creates a much larger pool of competitors.

Used to be that Fiat, Lancia, Alfa Romeo, Renault, Citroen, and Peugeot (and several boutique brands too) competed, respecitvely in Italy and France, just as GM, Ford, and Chrysler competed in the US. There was enough competition for the relatively insular markets of the time.

With globalization, now each country has so many brands to choose from that the system becomes inefficient. To remain competitive, consolidation is unavoidable.

In my opinion, in another 20 years or so, there will be a mass adoption of the public transport systems in most of the developing countries . Most of the urban population today has become weary of using their cars for daily commuting to office and the emergence of the good public transport systems such a Metro, AC luxury buses and may be in future the driverless taxis will actually reduce the demand for personal cars.

Exactly; in my opinion, car is the worst ever solution. It is just a huge waste of resources, waste of energy and the most deadly device on earth. And speaking about China and India, it doesn't scale. It's already a big mess in low density areas in Europe and US, i don't imagine what it will be in developing countries. I just hope they won't repeat the same errors. Car is just an unsustainable solution. Do you want a clue? Already, most big towns in Europe are slowly closing their doors to cars, and switching to bikes and public transport systems. I could go on and on.

I agree, which makes me worry there is a great deal of attraction to the automotive electronics market. It's understandable the electronics industry sees a great market in turning the car into a transporting smartphone, but it's the worst thing for the world. The smartphone is already terrible in itself, degrading human interactions all over the world.

and it's getting worse when drivers are talking with their smartphones ; i don't even talk about texting ... In my opinion, cars are incompatible with electronics gadgets. I just don't get it how it is allowed to drive a 2 tonne car at speed while playing with a smartphone or watching any screen.